Question 1

Refer to the graphs shown. An increase in quantity demanded is best shown by which arrow?

Accepted Answer

A) A 
B) B 
C) C 
D) D 
A) A 
B) B 
C) C 
D) D A

Question 2

The table below shows the quantity demanded and quantity supplied of DVDs at each price level. $$\begin{array} { | r | r | r | c | } 
\hline \begin{array} { c } 
\text { Price } \
\text { (dollars) }
\end{array} & \begin{array} { c } 
\text { Quantity } \
\text { Demanded }
\end{array} & \begin{array} { c } 
\text { Quantity } \
\text { Supplied }
\end{array} & \begin{array} { c } 
\text { Surplus (+) } \
\text { Shortage (-) }
\end{array} \
\hline 20.00 & 10 & 500 & \
\hline 18.00 & 25 & 400 & \
\hline 16.00 & 45 & 250 & \
\hline 14.00 & 80 & 200 & \
\hline 12.00 & 140 & 140 & \
\hline 10.00 & 200 & 80 & \
\hline 8.00 & 300 & 40 & \
\hline 6.00 & 450 & 5 & \
\hline
\end{array}$$ (a)Fill out the column entitled Surplus/Shortage.
(b)What are the equilibrium price and equilibrium quantity in this market?
(c)Suppose that consumers' taste changed in favor of DVDs due to their high quality.What happens at the original equilibrium price level calculated in Part (b)?
(d)Suppose that advances in technology reduced the production cost of DVD players.What happens at the original equilibrium price level calculated in Part (b)?

Accepted Answer

(a) $$\begin{array} { | r | r | r | r | } 
\hline \begin{array} { c } 
\text { Price } \
\text { (dollars) }
\end{array} & \begin{array} { c } 
\text { Quantity } \
\text { Demanded }
\end{array} & { \begin{array} { c } 
\text { Quantity } \
\text { Supplied }
\end{array} } & \begin{array} { c } 
\text { Surplus (+) } \
\text { Shortage ( -} )
\end{array} \
\hline 20.00 & 10 & 500 & + 490 \
\hline 18.00 & 25 & 400 & + 375 \
\hline 16.00 & 45 & 250 & + 205 \
\hline 14.00 & 80 & 200 & + 120 \
\hline 12.00 & 140 & 140 & 0 \
\hline 10.00 & 200 & 80 & - 120 \
\hline 8.00 & 300 & 40 & - 260 \
\hline 6.00 & 450 & 5 & - 445 \
\hline
\end{array}$$ (b)Equilibrium occurs when quantity demanded equals quantity supplied,i.e. ,when there are no shortages or surpluses in the market.This point is at a price of $12.00 per DVD and a quantity of 140 DVDs.
(c)The demand for DVDs will increase at each price level.Therefore,at $12.00 per unit,the quantity demanded will be greater than the quantity supplied (140 DVDs).A shortage will appear in the market.
(d)A decrease in the production cost of DVD players increases their supply.The equilibrium price of DVD players decreases,and consumers purchase more of them.Since DVD players and DVDs are complementary goods,the demand for DVDs will shift to the right.At a price of $12.00 per DVD,there will be a shortage of DVDs in the market.

Question 3

Which of the following is not held constant as you move along the demand curve?

Accepted Answer

A) The price of that good 
B) The price of other goods 
C) The incomes of consumers 
D) The preferences of consumers for the good 
A) The price of that good 
B) The price of other goods 
C) The incomes of consumers 
D) The preferences of consumers for the good A

Question 4

Consider the following supply and demand diagram for Tootsie Rolls.Note that the market is currently in equilibrium,with a price of P* and a quantity exchanged of Q*.   For each of the scenarios below,draw a picture that illustrates the impact on price and quantity exchanged.Explain each of your pictures by describing what is happening to the demand side of the market.
(a)The American Association of Chocolate Lovers designates the Tootsie Roll as its official candy.
(b)The Tootsie Roll Company computerizes their Tootsie Roll manufacturing plant,lowering unit costs of production.

Accepted Answer

(a)The diagram: @#IMG-DLM& The designation of Toot

Question 5

A decrease in the number of consumers in a market causes market demand to:

Accepted Answer

A) decrease, resulting in a surplus which will be eliminated as price rises. 
B) decrease, resulting in a surplus which will be eliminated as price falls. 
C) increase, resulting in a shortage which will be eliminated as price rises. 
D) increase, resulting in a shortage which will be eliminated as price falls. 
A) decrease, resulting in a surplus which will be eliminated as price rises. 
B) decrease, resulting in a surplus which will be eliminated as price falls. 
C) increase, resulting in a shortage which will be eliminated as price rises. 
D) increase, resulting in a shortage which will be eliminated as price falls.

Question 6

The following graph shows the supply of movie downloads. If price changes from $4.00 to $2.00 then:

Accepted Answer

A) market quantity supplied will increase by 7. 
B) market quantity supplied will decrease by 12. 
C) Charlie will stop supplying any of this product. 
D) Charlie, Barry, and Ann will proportionally reduce the quantity that they each supply. 
A) market quantity supplied will increase by 7. 
B) market quantity supplied will decrease by 12. 
C) Charlie will stop supplying any of this product. 
D) Charlie, Barry, and Ann will proportionally reduce the quantity that they each supply.

Question 7

Which of the following is not likely to change the supply of laptops?

Accepted Answer

A) An increase in consumers' incomes 
B) A technological breakthrough that makes it much less costly to produce computer chips 
C) A decrease in the wage paid to electrical engineers 
D) An increase in taxes on computer chips paid by producers 
A) An increase in consumers' incomes 
B) A technological breakthrough that makes it much less costly to produce computer chips 
C) A decrease in the wage paid to electrical engineers 
D) An increase in taxes on computer chips paid by producers

Question 8

Given the graph shown, the quantity that would be associated with the price of $4 in a supply table would be:

Accepted Answer

A) 2. 
B) 4. 
C) 6. 
D) 8. 
A) 2. 
B) 4. 
C) 6. 
D) 8.

Question 9

Refer to the graphs shown. The effect of an increase in price on demand is best shown by which arrow?

Accepted Answer

A) A 
B) B 
C) C 
D) D 
A) A 
B) B 
C) C 
D) D

Question 10

The fallacy of composition refers to the false assumption:

Accepted Answer

A) that if A happens before B, then A caused B. 
B) that what is true for a part will also be true for the whole. 
C) that what is true for the whole must also be true for a part. 
D) of all other things held constant. 
A) that if A happens before B, then A caused B. 
B) that what is true for a part will also be true for the whole. 
C) that what is true for the whole must also be true for a part. 
D) of all other things held constant.

Question 11

If cigar prices tripled while sales of cigars rose 30 percent, this would likely be due to a shift in demand.

Accepted Answer

A) True 
 B)False

Question 12

What is meant by "the fallacy of composition"? Because of the fallacy of composition,it is not possible to apply the microeconomic analysis of individual firms and consumers directly to the macroeconomic analysis of entire nations.Explain why this is so.

Accepted Answer

The fallacy of composition is the false

Question 13

Refer to the graphs shown. The market is fat-free potato chips that contain the fat substitute olestra. Which graph best represents the impact of increased consumer concern about the effects of olestra on long-term health?

Accepted Answer

A) Graph a 
B) Graph b 
C) Graph c 
D) Graph d 
A) Graph a 
B) Graph b 
C) Graph c 
D) Graph d

Question 14

How would a decline in demand for imported commodities by the Chinese affect the market for cargo transportation to China?

Accepted Answer

A) Supply of cargo transportation shifts to the right causing an increase in quantity demanded and decline in equilibrium price. 
B) Supply of cargo transportation shifts to the right causing an increase in demand and equilibrium quantity and a decrease in equilibrium price. 
C) Demand for cargo transportation shifts to the left causing a decline in quantity supplied and price. 
D) Demand for cargo transportation shifts to the left causing a decline in supply and equilibrium quantity and price. 
A) Supply of cargo transportation shifts to the right causing an increase in quantity demanded and decline in equilibrium price. 
B) Supply of cargo transportation shifts to the right causing an increase in demand and equilibrium quantity and a decrease in equilibrium price. 
C) Demand for cargo transportation shifts to the left causing a decline in quantity supplied and price. 
D) Demand for cargo transportation shifts to the left causing a decline in supply and equilibrium quantity and price.

Question 15

For which of the following markets would the fallacy of composition least likely apply?

Accepted Answer

A) Labor market 
B) Market for savings and investment 
C) World market for oil 
D) Poultry market 
A) Labor market 
B) Market for savings and investment 
C) World market for oil 
D) Poultry market

Question 16

Which of the following would best explain a decrease in the supply of squash?

Accepted Answer

A) An increase in the price of other vegetables 
B) An increase in the price of squash 
C) A decrease in the price of squash 
D) A decrease in the cost of growing squash 
A) An increase in the price of other vegetables 
B) An increase in the price of squash 
C) A decrease in the price of squash 
D) A decrease in the cost of growing squash

Question 17

According to the law of demand an increase in the price of gasoline will:

Accepted Answer

A) increase the quantity demanded of gasoline, other things constant. 
B) decrease the quantity demanded of gasoline, other things constant. 
C) increase the demand for gasoline. 
D) decrease the demand for gasoline. 
A) increase the quantity demanded of gasoline, other things constant. 
B) decrease the quantity demanded of gasoline, other things constant. 
C) increase the demand for gasoline. 
D) decrease the demand for gasoline.

Question 18

The law of supply states that, other things equal, as the price of a good goes:

Accepted Answer

A) up, the quantity supplied goes up. 
B) up, the supply goes down. 
C) down, the quantity supplied goes up. 
D) down, the supply goes down. 
A) up, the quantity supplied goes up. 
B) up, the supply goes down. 
C) down, the quantity supplied goes up. 
D) down, the supply goes down.

Question 19

In one year,the price of soybeans was $3.50 a bushel,and the Jones family farm planted 7,500 acres of them.In the following year,although the price of soybeans fell to $3.25 a bushel,the Jones family farm planted 8,200 acres of them.Use the concepts of a shift in the supply curve versus a movement along the supply curve to explain why this increase in soybean acreage does not represent a violation of the law of supply.

Accepted Answer

Most likely,the assumption of other thin

Question 20

Refer to the graphs shown. The consequences of improved technology combined with an increase in the number of consumers can best be illustrated by:

Accepted Answer

A) a. 
B) b. 
C) c. 
D) d. 
A) a. 
B) b. 
C) c. 
D) d.

Exam 4: Supply and Demand

Refer to the graphs shown. An increase in quantity demanded is best shown by which arrow?

Which of the following is not held constant as you move along the demand curve?

A decrease in the number of consumers in a market causes market demand to:

The following graph shows the supply of movie downloads. If price changes from $4.00 to $2.00 then:

Which of the following is not likely to change the supply of laptops?

Given the graph shown, the quantity that would be associated with the price of $4 in a supply table would be:

Refer to the graphs shown. The effect of an increase in price on demand is best shown by which arrow?

The fallacy of composition refers to the false assumption:

If cigar prices tripled while sales of cigars rose 30 percent, this would likely be due to a shift in demand.

What is meant by "the fallacy of composition"? Because of the fallacy of composition,it is not possible to apply the microeconomic analysis of individual firms and consumers directly to the macroeconomic analysis of entire nations.Explain why this is so.

Refer to the graphs shown. The market is fat-free potato chips that contain the fat substitute olestra. Which graph best represents the impact of increased consumer concern about the effects of olestra on long-term health?

How would a decline in demand for imported commodities by the Chinese affect the market for cargo transportation to China?

For which of the following markets would the fallacy of composition least likely apply?

Which of the following would best explain a decrease in the supply of squash?

According to the law of demand an increase in the price of gasoline will:

The law of supply states that, other things equal, as the price of a good goes:

Refer to the graphs shown. The consequences of improved technology combined with an increase in the number of consumers can best be illustrated by:

Economics and Economic Reasoning

The Production Possibility Model, Trade, and Globalization

Economic Institutions

Using Supply and Demand

Describing Supply and Demand: Elasticities

Taxation and Government Intervention

Market Failure Versus Government Failure

Comparative Advantage, Exchange Rates, and Globalization

International Trade Policy

Production and Cost Analysis I

Production and Cost Analysis II

Perfect Competition

Monopoly and Monopolistic Competition

Oligopoly and Antitrust Policy

Real-World Competition and Technology

Work and the Labor Market

Who Gets What the Distribution of Income

The Logic of Individual Choice: the Foundation of Supply and Demand

Game Theory, Strategic Decision Making, and Behavioral Economics

Thinking Like a Modern Economist

Behavioral Economics and Modern Economic Policy

Microeconomic Policy, Economic Reasoning, and Beyond

Economic Growth, Business Cycles, and Unemployment

Measuring and Describing the Aggregate Economy

The Keynesian Short-Run Policy Model: Demand-Side Policies

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The Financial Sector and the Economy

Monetary Policy

Financial Crises, Panics, and Unconventional Monetary Policy

Deficits and Debt: the Austerity Debate

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Jobs and Unemployment

Inflation, Deflation, and Macro Policy

International Financial Policy

Macro Policy in a Global Setting

Structural Stagnation and Globalization

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